Pilot program backed by state Senate president billed as way to cut benefits spending while improving quality of care

Credit: Newsworks

State Senate President Stephen Sweeney (D-Gloucester)

While Gov. Chris Christie’s latest proposal to reduce government spending on public-employee healthcare has stalled, a pilot program with the same goal backed by Senate President Stephen Sweeney is moving forward.

A vote yesterday by a panel that oversees the design of public-employee health benefit plans in New Jersey paves the way for an experimental program based on offering patient-centered healthcare to New Jersey public employees.

It’s the latest development in an ongoing public debate over employee-benefit costs that Christie, a second-term Republican now running for president, has been driving for much of the last year as state revenue growth has failed to keep pace with increasing worker pension and healthcare costs.

Sweeney (D-Gloucester) proposed the patient-centered healthcare pilot initiative in February as a way to cut the costs of providing employee healthcare while at the same time improving results. Rather than a conventional fee-for-service model, the pilot relies on a model where doctors are paid based on seeing a limited number of patients, with bonuses awarded for keeping those patients healthy.

Sweeney’s proposal came out just weeks before a nonpartisan panel of benefits experts convened by Christie released its own set of recommendations aimed at reducing costs associated with employee pension and health benefits.

But while public-worker unions embraced Sweeney’s idea, they rejected that panel’s recommendations, saying the result would be simply shifting more costs onto the employees instead of reducing the price of healthcare or improving outcomes.

'A great victory'

Sweeney called yesterday’s approval of the pilot program by the State Health Benefits Program Plan Design Committee in Trenton “a great victory for taxpayers and employees.”

“It will cut health-insurance costs for state and local governments while reducing employee contributions to their healthcare costs, both in their paychecks and at the doctor’s office,” he said.
Sweeney credited labor unions for supporting the proposal and working to get it implemented over the last five months.

The design committee, created as part of a sweeping benefits overhaul that was adopted with bipartisan support in 2011, has equal representation among the unions and the Christie administration, with six members appointed by the governor and six representing the unions -- meaning a compromise has to be forged to move anything forward. Before the 2011 law, the administration had the final say.

The pilot program was the most noteworthy item in a package of technical benefits changes that were approved yesterday.

“It took months of negotiations, but it was worth it,” he said.

Christopher Santarelli, a spokesman for the state Department of Treasury, said the actions taken yesterday by the design committee are projected to save about $100 million.

“We are gratified that this committee was focused on improving health outcomes and finding savings for the health benefits program,” Santarelli said.

The goal is for the pilot to be up and running during the first months of 2016. For now, the pilot would begin without teachers unless a separate panel that oversees healthcare programs for teachers in New Jersey also votes to approve the program.

When it was unveiled in February, Sweeney said the pilot program was modeled off a similar patient-centered healthcare initiative that had proven to be a cost-saver in Vermont.

Increasingly popular model

Patient-centered healthcare is similar to the model increasingly used by self-insured health plans as well as government programs like Medicare and Medicaid. Accountable-care organizations are also based on variations of the concept that doctors’ pay should be tied to patient outcomes.

For patients, a key attraction is the absence of out-of-pocket costs when they use participating providers. And doctors ideally get to spend more time with their patients under the patient-centered model.

Sweeney’s original proposal called for a 60,000-person limit on the number of employees who could voluntarily enroll in the pilot, but the final program approved by the design committee did not include an enrollment cap.

The benefits report issued in February by the nonpartisan commission impaneled by Christie suggested the state could save as much as $2 billion annually by changing employee healthcare coverage. The report said those savings could be achieved by moving employees from what is considered platinum-level coverage by the federal government to a plan that would be considered gold-level.

Program could shift emphasis onto better health rather than paying for services

Such a change would likely result in the workers contributing more out of pocket than they do now for their benefits, something the commission said would better align public-employee benefits with those offered by companies in the private sector in New Jersey.

And as part of its broader recommendations, the commission also proposed using the projected savings generated from the cheaper healthcare plans to pay down the state pension system’s debt. Right now, the pension system – which covers the retirements of an estimated 773,000 retired and current workers – is saddled with at least $40 billion in debt thanks to years of underfunding by Christie and prior governors from both parties.

The panel, meanwhile, also proposed freezing the pension system and moving employees into a new retirement plan with features of a 401(k), a key recommendation that would also see local school boards pick up teacher retirement costs, which have long been covered by the state.

But local government officials have questioned whether enough savings could be achieved by changing employee healthcare plans to pay off the pension system’s debt and absorb teacher-retirement costs without increasing property tax bills.

And despite winning Christie’s endorsement, so far none of the commission’s recommendations have been embraced by Democrats who control the Legislature.